UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of report (Date of earliest event reported): January 29, 2010
ENZON
PHARMACEUTICALS, INC.
(Exact
Name of Registrant as Specified in Charter)
|
Delaware
|
0-12957
|
22-2372868
|
||
|
(State
or Other Jurisdiction of Incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification
No.)
|
|
685
Route 202/206, Bridgewater, NJ
|
08807
|
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Registrant's telephone number,
including area code: (908)
541-8600
|
Not
Applicable
|
||
|
(Former
Name or Former Address, if Changed Since Last Report)
|
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General
Instruction A.2. below):
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
x
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Section
2 – Financial Information
Item
2.01. Completion of Acquisition or Disposition of
Assets.
On
January 29, 2010, Enzon Pharmaceuticals, Inc. (the "Company") completed the
previously announced sale of its specialty pharmaceuticals business (the
"Business"), which includes (i) the Company's marketed products Oncaspar®,
DepoCyt®, Abelcet® and Adagen® (the "Products"), (ii) the Company's
Indianapolis, Indiana manufacturing facility, and (iii) other related assets
(collectively, the "Assets") to Klee Pharmaceuticals, Inc. ("Klee") and Defiante
Farmacêutica, S.A. ("Defiante" and, together with Klee, the "Purchasing
Parties") pursuant to an Asset Purchase Agreement, dated as of November 9, 2009,
by and between Klee, Defiante and Sigma-Tau Finanziaria S.p.A., on the one hand,
and the Company, on the other hand (the "Agreement").
Pursuant
to the terms of the Agreement, in consideration for the sale of the Assets, the
Company received $300 million in cash, subject to certain customary working
capital adjustments, and the Purchasing Parties assumed certain liabilities
associated with the Business. In addition, the Agreement provides
that the Purchasing Parties will make certain milestone payments to the Company
as follows: (i) $5 million upon approval by the U.S. Food and Drug
Administration ("FDA") of a reformulation of Oncaspar® using the SS linker, (ii)
$7 million upon FDA approval of a reformulation of Oncaspar® using the SC linker
and (iii) either (a) $15 million if the European Medicines Agency ("EMEA")
approves a reformulation of Oncaspar® using the SC linker on an accelerated
basis or (b) $10 million if the EMEA approves a reformulation of Oncaspar® using
the SC linker on a non-accelerated basis. The Company will also
receive the following royalty payments: (i) for the years 2010 through 2014, 5%
of the amount by which Net Receipts (as defined in the Agreement) in respect of
Products sold in the United States in such years exceeds Net Receipts in respect
of Products sold in the United States in 2009; (ii) for the years 2010 and 2011,
10% of the amount by which Net Receipts in respect of Products sold outside the
United States in such years exceeds Net Receipts in respect of Products sold
outside the United States in 2009; and (iii) for the years 2012 through 2014, 5%
of the amount by which Net Receipts in respect of Products sold outside the
United States in such years exceeds Net Receipts in respect of Products sold
outside the United States in 2009.
Section
8 – Other Information
Item
8.01. Other Events.
On
January 29, 2010, the Company issued a press release regarding the completion of
the sale of the Business and its intention to commence an offer to repurchase
the Company's outstanding 4% Convertible Senior Notes due 2013. A
copy of the press release is filed as Exhibit 99.1 to this Current Report on
Form 8-K and is incorporated herein by reference.
Section
9 – Financial Statements and Exhibits
Item
9.01. Financial Statements and Exhibits.
(b)
Pro Forma Financial
Information.
Attached
as Exhibit 99.2 and incorporated herein by reference is (i) the unaudited pro
forma condensed consolidated balance sheet of the Company as of the September
30, 2009, (ii) the unaudited pro forma condensed consolidated statements of
operations for the nine months ended September 30, 2009 and September 30, 2008,
and (iii) the unaudited pro forma condensed consolidated statements of
operations for the years ended December 31, 2008, December 31, 2007 and December
31, 2006. These pro forma financial statements are derived from the
historical consolidated financial statements of the Company and give effect to
the sale of the Business to the Purchasing Parties and the receipt of the net
proceeds related thereto.
(d)
Exhibits.
|
Exhibit
No.
|
Exhibit
|
|
|
99.1
|
Enzon
Pharmaceuticals, Inc. press release, dated January 29,
2010.
|
|
|
99.2
|
Unaudited
Pro Forma Condensed Consolidated Financial Statements of Enzon
Pharmaceuticals, Inc.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Date: January
29, 2010
|
ENZON
PHARMACEUTICALS, INC.
|
||
|
By:
|
/s/
Craig A. Tooman
|
|
|
Name:
|
Craig
A. Tooman
|
|
|
Title:
|
Executive
Vice President, Finance and Chief Financial Officer
|
|
Exhibit
Index
|
Exhibit
No.
|
Exhibit
|
|
|
99.1
|
Enzon
Pharmaceuticals, Inc. press release, dated January 29,
2010.
|
|
|
99.2
|
Unaudited
Pro Forma Condensed Consolidated Financial Statements of Enzon
Pharmaceuticals, Inc.
|
Exhibit 99.1
|
Contact:
|
Craig
Tooman
|
|
|
EVP,
Finance and Chief
Financial Officer |
||
|
908-541-8777
|
ENZON
COMPLETES SALE OF SPECIALTY PHARMACEUTICAL BUSINESS
BRIDGEWATER,
NJ – January 29, 2010 – Enzon Pharmaceuticals, Inc. (Nasdaq: ENZN) ("Enzon")
announced today that it has closed the sale of its specialty pharmaceutical
business to the sigma-tau Group ("sigma-tau"). Enzon is a biopharmaceutical
company dedicated to the discovery and development of important medicines for
patients with cancer and other life-threatening conditions. Enzon's
business now consists of its royalties, Peg SN38, LNA and PEG technology
platforms.
The
specialty pharmaceutical business sold to sigma-tau includes four marketed
products, Oncaspar®, Adagen®, DepoCyt®, and Abelcet®, as well as
the manufacturing facility in Indianapolis, Indiana.
At the
closing, Enzon received $300 million in cash. Due to the availability of net
operating loss carry forwards, taxes payable on the gain of the sale are not
anticipated to be significant. The purchase price is subject to a customary
post-closing working capital adjustment. In addition, Enzon may be entitled to
an additional amount of up to $27 million based on the achievement of success
milestones and royalties of 5 to 10 percent on incremental net sales above a
2009 baseline amount through 2014 in respect of the four marketed specialty
pharmaceutical products sold.
"We are
very pleased to complete this transaction with sigma-tau. Enzon will
now focus on its innovative pipeline and technology platforms”, said Alex
Denner, Enzon's Chairman of the Board of Directors. “We will continue to
evaluate options to return value to our shareholders."
A portion
of the proceeds from the sale will be used to commence an offer to repurchase
its outstanding 4% Convertible Senior Notes due 2013.
This
announcement is for informational purposes only and is not an offer to buy, or
the solicitation of an offer to sell, any of Enzon's 4% Convertible Notes due
2013 (the "Notes"). Enzon will announce further information on the details of
the tender offer in the near future. The tender offer will be made solely by and
subject to the terms and conditions set forth in a Schedule TO (including the
Offer to Purchase and related Letter of Transmittal) that will be filed by Enzon
with the Securities and Exchange Commission ("SEC"). The Schedule TO will
contain important information, including complete instructions on how to tender
Notes into the offer, and should be read carefully and in its entirety before
any decision is made with respect to the offer. The Offer to Purchase and Letter
of Transmittal will be delivered to all holders of Notes. Once
the
Schedule TO and Offer documents are filed with the SEC, they will be available
free of charge on the SEC’s website at www.sec.gov.
About
Enzon
Enzon
Pharmaceuticals, Inc is a biopharmaceutical company dedicated to the development
of important medicines for patients with cancer and other life-threatening
conditions. Enzon's drug development programs utilize several cutting-edge
approaches, including its industry-leading PEGylation technology platform used
to create product candidates with benefits such as reduced dosing frequency and
less toxicity. Enzon's PEGylation technology has created a royalty revenue
stream from licensing partnerships for products developed using the technology.
Further information about Enzon and this press release can be found on Enzon's
web site at www.enzon.com.
Forward
Looking Statements
There
are forward-looking statements contained herein, which can be identified by the
use of forward-looking terminology such as the words "believes," "expects,"
"may," "will," "should,” "potential," "anticipates," "plans" or "intends" and
similar expressions. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause actual results, events or
developments to be materially different from the future results, events or
developments indicated in such forward-looking statements. Such factors include,
but are not limited to the timing, success and cost of clinical studies; the
ability to obtain regulatory approval of products and market acceptance of
products developed by Enzon. A more detailed discussion of these and other
factors that could affect results is contained in Enzon's filings with the U.S.
Securities and Exchange Commission, including Enzon's Annual Report on Form 10-K
for the period ended December 31, 2008. These factors should be considered
carefully and readers are cautioned not to place undue reliance on such
forward-looking statements. No assurance can be given that the future results
covered by the forward-looking statements will be achieved. All information in
this press release is as of the date of this press release and Enzon does not
intend to update this information.
Exhibit
99.2
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
following Unaudited Pro Forma Condensed Consolidated Balance Sheet and the
Unaudited Pro Forma Condensed Consolidated Statements of Operations are derived
from the historical consolidated financial statements of Enzon Pharmaceuticals,
Inc. and give effect to (i) the sale (the "Asset Sale") of Enzon's specialty
pharmaceuticals business ("Specialty Pharmaceuticals") to Klee Pharmaceuticals,
Inc. and Defiante Farmacêutica, S.A. (together, the "Purchasing Parties")
pursuant to the Asset Purchase Agreement (the "Asset Purchase Agreement"), dated
as of November 9, 2009, by and between the Purchasing Parties and Sigma-Tau
Finanziaria S.p.A. (solely with respect to certain sections of the Asset
Purchase Agreement), on the one hand, and Enzon, on the other hand, (ii) the
receipt of the net proceeds from the Asset Sale and (iii) the assumptions and
adjustments described in the accompanying notes to the unaudited pro forma
condensed consolidated financial statements. The following unaudited pro forma
condensed consolidated financial statements reflect Enzon’s continued ownership
of its royalties and the research and development operations.
Pro
forma financial information is intended to provide investors with information
about the continuing impact of a transaction by showing how a specific
transaction might have affected historical financial statements, illustrating
the scope of the change in the historical financial position and results of
operations. The adjustments made to historical information give effect to events
that are directly attributable to the Asset Sale, factually supportable, and
expected to have a continuing impact.
The
unaudited pro forma condensed consolidated financial statements consist
of:
|
·
|
Unaudited
Pro Forma Condensed Consolidated Balance Sheet as of September 30,
2009;
|
|
|
·
|
Unaudited
Pro Forma Condensed Consolidated Statements of Operations for the nine
months ended September 30, 2009 and September 30, 2008;
and
|
|
|
·
|
Unaudited
Pro Forma Condensed Consolidated Statements of Operations for the years
ended December 31, 2008, December 31, 2007 and December 31,
2006.
|
The
unaudited pro forma condensed consolidated financial statements have been
prepared giving effect to the Asset Sale as if it occurred as of September 30,
2009 for the Unaudited Pro Forma Condensed Consolidated Balance Sheet and as of
January 1, 2006 for the Unaudited Pro Forma Condensed Consolidated Statements of
Operations.
The
unaudited pro forma condensed consolidated financial statements should be read
in conjunction with the historical audited consolidated financial statements and
notes thereto included in Enzon’s Form 10-K for the year ended December 31, 2008
and Form 10-Q for the nine months ended September 30, 2009, as filed with the
Securities and Exchange Commission, which are incorporated herein by
reference.
The
unaudited pro forma condensed consolidated financial statements are prepared in
accordance with Article 11 of Regulation S-X. The pro forma adjustments are
described in the accompanying notes and are based upon information and
assumptions available at the time of the filing of this Current Report of Form
8-K proxy statement.
Enzon
did not account for Specialty Pharmaceuticals as, and it was not operated as, a
separate, stand-alone entity, subsidiary or division for the periods presented.
The unaudited pro forma condensed consolidated financial statements do not
purport to represent, and are not necessarily indicative of, what Enzon's actual
financial position and results of operations would have been had the Asset Sale
occurred on the dates indicated. In addition, these unaudited pro forma
condensed consolidated financial statements should not be considered to be fully
indicative of Enzon's future financial performance. For example, actions that
management may undertake to reduce overhead expenses in light of the Asset Sale
are not reflected.
1
UNAUDITED
PRO FORMA CONDENSED
CONSOLIDATED
BALANCE SHEET
September
30, 2009
(In
thousands)
|
Pro
Forma Adjustments
|
||||||||||||||||
|
As
Reported
|
Sale
of Specialty Pharmaceuticals
|
Other
Adjustments
|
Pro
Forma
|
|||||||||||||
|
ASSETS
|
||||||||||||||||
|
Current
assets:
|
||||||||||||||||
|
Cash
and cash equivalents
|
$ | 48,614 | $ | — | $ | 300,000 | (a) | $ | 348,614 | |||||||
|
Short-term
investments
|
61,899 | — | — | 61,899 | ||||||||||||
|
Accounts
receivable, net
|
15,199 | 14,918 | — | 281 | ||||||||||||
|
Inventories
|
17,061 | 17,061 | — | — | ||||||||||||
|
Other
current assets
|
7,626 | 3,119 | — | 4,507 | ||||||||||||
|
Total
current assets
|
150,399 | 35,098 | 300,000 | 415,301 | ||||||||||||
|
Property
and equipment, net
|
40,623 | 12,173 | — | 28,450 | ||||||||||||
|
Marketable
securities
|
90,791 | — | — | 90,791 | ||||||||||||
|
Amortizable
intangible assets, net
|
52,514 | 52,514 | — | — | ||||||||||||
|
Other
assets
|
3,348 | 90 | — | 3,258 | ||||||||||||
|
Total
assets
|
$ | 337,675 | $ | 99,875 | $ | 300,000 | $ | 537,800 | ||||||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||
|
Current
liabilities:
|
||||||||||||||||
|
Accounts
payable
|
$ | 6,007 | $ | 4,408 | $ | — | $ | 1,599 | ||||||||
|
Accrued
expenses
|
23,733 | 10,114 | — | 13,619 | ||||||||||||
|
Total
current liabilities
|
29,740 | 14,522 | — | 15,218 | ||||||||||||
|
Notes
payable
|
250,050 | — | — | 250,050 | ||||||||||||
|
Other
liabilities
|
4,482 | — | — | 4,482 | ||||||||||||
|
Total
liabilities
|
284,272 | 14,522 | — | 269,750 | ||||||||||||
|
Stockholders’
equity
|
53,403 | 85,353 | 300,000 | (b) | 268,050 | |||||||||||
|
Total
liabilities and stockholders’ equity
|
$ | 337,675 | $ | 99,875 | $ | 300,000 | $ | 537,800 | ||||||||
2
UNAUDITED
PRO FORMA CONDENSED
CONSOLIDATED
STATEMENT OF OPERATIONS
For
the Nine Months Ended September 30, 2009
(In
thousands, except per-share data)
|
Pro
Forma Adjustments
|
||||||||||||||||
|
As
Reported
|
Sale
of Specialty Pharmaceuticals
|
Other
Adjustments
|
Pro
Forma
|
|||||||||||||
|
Product
sales, net
|
$ | 88,250 | $ | 88,250 | $ | — | $ | — | ||||||||
|
Royalties
|
41,146 | 1,931 | — | 39,215 | ||||||||||||
|
Contract
manufacturing
|
11,037 | 11,037 | — | — | ||||||||||||
|
Contract
research and development
|
— | — | 5,202 | (d) | 5,202 | |||||||||||
|
Total
revenues
|
140,433 | 101,218 | 5,202 | 44,417 | ||||||||||||
|
Costs
and expenses:
|
||||||||||||||||
|
Cost
of product sales and contract manufacturing
|
37,357 | 37,357 | — | — | ||||||||||||
|
Research
and development
|
53,783 | 19,450 | 5,202 | (d) | 39,535 | |||||||||||
|
Selling,
general and administrative
|
46,197 | 36,183 | 17,340 | (c) | 27,354 | |||||||||||
|
Amortization
of acquired intangible assets
|
500 | 500 | — | — | ||||||||||||
|
Restructuring
charge
|
1,610 | 916 | — | 694 | ||||||||||||
|
Total
costs and expenses
|
139,447 | 94,406 | 22,542 | 67,583 | ||||||||||||
|
Operating
income (loss)
|
986 | 6,812 | (17,340 | ) | (23,166 | ) | ||||||||||
|
Other
expense
|
(438 | ) | — | — | (438 | ) | ||||||||||
|
Income
(loss) before income tax
|
548 | 6,812 | (17,340 | ) | (23,604 | ) | ||||||||||
|
Income
tax benefit
|
(699 | ) | (243 | ) | — | (e) | (456 | ) | ||||||||
|
Net
income (loss)
|
$ | 1,247 | $ | 7,055 | $ | (17,340 | ) | $ | (23,148 | ) | ||||||
|
Earnings
(loss) per common share:
|
||||||||||||||||
|
Basic
|
$ | 0.03 | $ | (0.51 | ) | |||||||||||
|
Diluted
|
$ | 0.03 | * | $ | (0.51 | ) | ||||||||||
|
Weighted
average shares outstanding:
|
||||||||||||||||
|
Basic
|
45,116 | 45,116 | ||||||||||||||
|
Diluted
|
45,523 | * | 45,116 | |||||||||||||
* Inclusion
of convertible notes in the computation of diluted earnings per share would be
antidilutive.
3
UNAUDITED
PRO FORMA CONDENSED
CONSOLIDATED
STATEMENT OF OPERATIONS
For
the Nine Months Ended September 30, 2008
(In
thousands, except per-share data)
|
Pro
Forma Adjustments
|
||||||||||||||||
|
As
Reported
|
Sale
of Specialty Pharmaceuticals
|
Other
Adjustments
|
Pro
Forma
|
|||||||||||||
|
Product
sales, net
|
$ | 85,547 | $ | 85,547 | $ | — | $ | — | ||||||||
|
Royalties
|
44,346 | 1,837 | — | 42,509 | ||||||||||||
|
Contract
manufacturing
|
18,634 | 18,634 | — | — | ||||||||||||
|
Contract
research and development
|
— | — | 2,577 | (d) | 2,577 | |||||||||||
|
Total
revenues
|
148,527 | 106,018 | 2,577 | 45,086 | ||||||||||||
|
Costs
and expenses:
|
||||||||||||||||
|
Cost
of product sales and contract manufacturing
|
48,018 | 48,018 | — | — | ||||||||||||
|
Research
and development
|
42,489 | 11,678 | 2,577 | (d) | 33,388 | |||||||||||
|
Selling,
general and administrative
|
52,121 | 40,437 | 18,364 | (c) | 30,048 | |||||||||||
|
Amortization
of acquired intangible assets
|
500 | 500 | — | — | ||||||||||||
|
Restructuring
charge
|
2,392 | 2,392 | — | — | ||||||||||||
|
Total
costs and expenses
|
145,520 | 103,025 | 20,941 | 63,436 | ||||||||||||
|
Operating
income (loss)
|
3,007 | 2,993 | (18,364 | ) | (18,350 | ) | ||||||||||
|
Net
other expense
|
(4,798 | ) | — | — | (4,798 | ) | ||||||||||
|
Loss
before income tax
|
(1,791 | ) | 2,993 | (18,364 | ) | (23,148 | ) | |||||||||
|
Income
tax
|
458 | 239 | — | (e) | 219 | |||||||||||
|
Net
loss
|
$ | (2,249 | ) | $ | 2,754 | $ | (18,364 | ) | $ | (23,367 | ) | |||||
|
Loss
per common share:
|
||||||||||||||||
|
Basic
|
$ | (0.05 | ) | $ | (0.53 | ) | ||||||||||
|
Diluted
|
$ | (0.05 | ) | $ | (0.53 | ) | ||||||||||
|
Weighted
average shares outstanding:
|
||||||||||||||||
|
Basic
|
44,328 | 44,328 | ||||||||||||||
|
Diluted
|
44,328 | 44,328 | ||||||||||||||
4
UNAUDITED
PRO FORMA CONDENSED
CONSOLIDATED
STATEMENT OF OPERATIONS
For
the Fiscal Year Ended December 31, 2008
(In
thousands, except per-share data)
|
Pro
Forma Adjustments
|
||||||||||||||||
|
As
Reported
|
Sale
of Specialty Pharmaceuticals
|
Other
Adjustments
|
Pro
Forma
|
|||||||||||||
|
Product
sales, net
|
$ | 113,789 | $ | 113,789 | $ | — | $ | — | ||||||||
|
Royalties
|
59,578 | 2,609 | — | 56,969 | ||||||||||||
|
Contract
manufacturing
|
23,571 | 23,571 | — | — | ||||||||||||
|
Contract
research and development
|
— | — | 4,078 | (d) | 4,078 | |||||||||||
|
Total
revenues
|
196,938 | 139,969 | 4,078 | 61,047 | ||||||||||||
|
Costs
and expenses:
|
||||||||||||||||
|
Cost
of product sales and contract manufacturing
|
61,702 | 61,702 | — | — | ||||||||||||
|
Research
and development
|
58,089 | 14,605 | 4,078 | (d) | 47,562 | |||||||||||
|
Selling,
general and administrative
|
71,310 | 54,644 | 23,703 | (c) | 40,369 | |||||||||||
|
Amortization
of acquired intangible assets
|
667 | 667 | — | — | ||||||||||||
|
Restructuring
charge
|
2,117 | 2,117 | — | — | ||||||||||||
|
Total
costs and expenses
|
193,885 | 133,735 | 27,781 | 87,931 | ||||||||||||
|
Operating
income (loss)
|
3,053 | 6,234 | (23,703 | ) | (26,884 | ) | ||||||||||
|
Net
other expense
|
(5,464 | ) | — | — | (5,464 | ) | ||||||||||
|
Loss
before income tax
|
(2,411 | ) | 6,234 | (23,703 | ) | (32,348 | ) | |||||||||
|
Income
tax
|
304 | 49 | — | (e) | 255 | |||||||||||
|
Net
loss
|
$ | (2,715 | ) | $ | 6,185 | $ | (23,703 | ) | $ | (32,603 | ) | |||||
|
Loss
per common share:
|
||||||||||||||||
|
Basic
|
$ | (0.06 | ) | $ | (0.73 | ) | ||||||||||
|
Diluted
|
$ | (0.06 | ) | $ | (0.73 | ) | ||||||||||
|
Weighted
average shares outstanding:
|
||||||||||||||||
|
Basic
|
44,398 | 44,398 | ||||||||||||||
|
Diluted
|
44,398 | 44,398 | ||||||||||||||
5
UNAUDITED
PRO FORMA CONDENSED
CONSOLIDATED
STATEMENT OF OPERATIONS
For
the Fiscal Year Ended December 31, 2007
(In
thousands, except per-share data)
|
Pro
Forma Adjustments
|
||||||||||||||||
|
As
Reported
|
Sale
of Specialty Pharmaceuticals
|
Other
Adjustments
|
Pro
Forma
|
|||||||||||||
|
Product
sales, net
|
$ | 100,686 | $ | 100,686 | $ | — | $ | — | ||||||||
|
Royalties
|
67,305 | 2,144 | — | 65,161 | ||||||||||||
|
Contract
manufacturing
|
17,610 | 17,610 | — | — | ||||||||||||
|
Contract
research and development
|
— | — | 3,995 | (d) | 3,995 | |||||||||||
|
Total
revenues
|
185,601 | 120,440 | 3,995 | 69,156 | ||||||||||||
|
Costs
and expenses:
|
||||||||||||||||
|
Cost
of product sales and contract manufacturing
|
54,978 | 54,978 | — | — | ||||||||||||
|
Research
and development
|
54,624 | 9,102 | 3,995 | (d) | 49,517 | |||||||||||
|
Selling,
general and administrative
|
65,723 | 55,536 | 23,237 | (c) | 33,424 | |||||||||||
|
Amortization
of acquired intangible assets
|
707 | 707 | — | — | ||||||||||||
|
Restructuring
charge
|
7,741 | 7,741 | — | — | ||||||||||||
|
Gain
on sale of royalty interest
|
(88,666 | ) | — | — | (88,666 | ) | ||||||||||
|
Total
costs, expenses and gain
|
95,107 | 128,064 | 27,232 | (5,725 | ) | |||||||||||
|
Operating
income
|
90,494 | (7,624 | ) | (23,237 | ) | 74,881 | ||||||||||
|
Net
other expense
|
(5,508 | ) | — | — | (5,508 | ) | ||||||||||
|
Income
before income tax
|
84,986 | (7,624 | ) | (23,237 | ) | 69,373 | ||||||||||
|
Income
tax
|
1,933 | 408 | — | (e) | 1,525 | |||||||||||
|
Net
income
|
$ | 83,053 | $ | (8,032 | ) | $ | (23,237 | ) | $ | 67,848 | ||||||
|
Earnings
per common share:
|
||||||||||||||||
|
Basic
|
$ | 1.89 | $ | 1.54 | ||||||||||||
|
Diluted
|
$ | 1.29 | $ | 1.08 | ||||||||||||
|
Weighted
average shares outstanding:
|
||||||||||||||||
|
Basic
|
43,927 | 43,927 | ||||||||||||||
|
Diluted
|
72,927 | 72,927 | ||||||||||||||
6
UNAUDITED
PRO FORMA CONDENSED
CONSOLIDATED
STATEMENT OF OPERATIONS
For
the Fiscal Year Ended December 31, 2006
(In
thousands, except per-share data)
|
Pro
Forma Adjustments
|
||||||||||||||||
|
As
Reported
|
Sale
of Specialty Pharmaceuticals
|
Other
Adjustments
|
Pro
Forma
|
|||||||||||||
|
Product
sales, net
|
$ | 101,024 | $ | 101,024 | $ | — | $ | — | ||||||||
|
Royalties
|
70,562 | 2,645 | — | 67,917 | ||||||||||||
|
Contract
manufacturing
|
14,067 | 14,067 | — | — | ||||||||||||
|
Contract
research and development
|
— | — | 3,329 | (d) | 3,329 | |||||||||||
|
Total
revenues
|
185,653 | 117,736 | 3,329 | 71,246 | ||||||||||||
|
Costs
and expenses:
|
||||||||||||||||
|
Cost
of product sales and contract manufacturing
|
50,121 | 50,121 | — | — | ||||||||||||
|
Research
and development
|
42,907 | 7,322 | 3,329 | (d) | 38,914 | |||||||||||
|
Selling,
general and administrative
|
70,382 | 60,362 | 18,983 | (c) | 29,003 | |||||||||||
|
Amortization
of acquired intangible assets
|
743 | 743 | — | — | ||||||||||||
|
Acquired
in-process research and development
|
11,000 | — | — | 11,000 | ||||||||||||
|
Total
costs and expenses
|
175,153 | 118,548 | 22,312 | 78,917 | ||||||||||||
|
Operating
income (loss)
|
10,500 | (812 | ) | (18,983 | ) | (7,671 | ) | |||||||||
|
Net
other income
|
11,567 | — | — | 11,567 | ||||||||||||
|
Income
before income tax (benefit)
|
22,067 | (812 | ) | (18,983 | ) | 3,896 | ||||||||||
|
Income
tax (benefit)
|
758 | 175 | — | (e) | 583 | |||||||||||
|
Net
income
|
$ | 21,309 | $ | (987 | ) | $ | (18,983 | ) | $ | 3,313 | ||||||
|
Earnings
per common share:
|
||||||||||||||||
|
Basic
|
$ | 0.49 | $ | 0.08 | ||||||||||||
|
Diluted
|
$ | 0.46 | $ | 0.08 | * | |||||||||||
|
Weighted
average shares outstanding:
|
||||||||||||||||
|
Basic
|
43,600 | 43,600 | ||||||||||||||
|
Diluted
|
61,379 | 43,600 | * | |||||||||||||
* Inclusion
of convertible notes in the computation of diluted earnings per share would be
antidilutive.
7
NOTES
TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
Pro
forma information is intended to reflect the impact of the Asset Sale on Enzon’s
historical financial position and results of operations through adjustments that
are directly attributable to the Asset Sale, that are factually supportable and
that are expected to have continuing impact. In order to accomplish this, Enzon
eliminated the historical results of Specialty Pharmaceuticals from Enzon's
historical financials. This represents the assets and liabilities that will be
conveyed to the Purchasing Parties as a result of the Asset Sale. It also
represents the results of operations of Enzon’s products and contract
manufacturing segments as well as the research and development activities
conducted by Enzon in support of Enzon's four U.S. Food and Drug Administration
approved products: Oncaspar for the treatment of patients with acute
lymphoblastic leukemia; Adagen for the treatment of severe combined
immunodeficiency disease; Abelcet, an antifungal agent, and DepoCyt for
treatment of lymphomatous meningitis (the "Products"). The Products were sold to
the Purchasing Parties as part of the Asset Sale. Enzon further adjusted for (i)
continuing research and development activities to be performed by Enzon on a
contract basis and (ii) allocated general and administrative
expenses.
These
unaudited pro forma condensed consolidated financial statements reflect all
adjustments that, in the opinion of management, are necessary to present fairly
the pro forma results of operations and financial position.
In
the preparation of the pro forma balance sheet as of September 30, 2009, the
assumption was made that the assets were sold and liabilities were assumed by
the Purchasing Parties pursuant to the Asset Purchase Agreement on September 30,
2009. The assumption made for purposes of the statements of operations was that
the Asset Sale took place on January 1, 2006.
|
(a)
|
Reflects
estimated proceeds to be received at the closing of sale of Specialty
Pharmaceuticals. The sale price is $300.0 million. Transaction-related
costs and expenses amounting to an estimated $7.5 million – $8.5 million
will be offset against the proceeds in calculating the accounting gain.
The unaudited condensed consolidated pro forma statements of operations do
not reflect these expenses as they are nonrecurring in nature; however,
these expenses will be reflected in Enzon's financial statements when the
Asset Sale is consummated. Additionally, there is the potential for a
working capital adjustment. Pursuant to the Asset Purchase Agreement, if
the working capital balance at the time of closing exceeds the target
amount of working capital as set forth in the Asset Purchase Agreement,
then the purchase price will be adjusted upward in an amount equal to the
excess, and if the working capital balance at the time of closing is less
than the target amount, then the purchase price will be adjusted downward
in an amount equal to the deficiency.
|
|
(b)
|
The
excess of the net proceeds from the sale (the $300.0 million purchase
price less transaction costs) over the net book value of the net assets
being sold will be the overall measure of the gain to Enzon. The sale is
expected to be accounted for in two parts: a sale of net assets of the
discontinued operations and a sale of Enzon's in-process research and
development related to ongoing development work on the Oncaspar and Adagen
sourcing programs. The purchase price will be allocated between the net
assets and the in-process research and development. At the closing of the
Asset Sale, any excess of purchase price received by Enzon, less
transaction expenses, over the book value of the assets sold will be
recognized as a gain for financial accounting purposes. In subsequent
reporting periods, Specialty Pharmaceuticals for current and prior
periods, including the gain on the sale of the assets, will be presented
as a discontinued operation for financial reporting purposes. The portion
of the purchase price allocated to in-process research and development
will be recognized in earnings from continuing operations as earned in
future periods along with related milestone payments payable pursuant to
the Asset Purchase Agreement, if any. While the final allocation of the
sales price to the various components of the Asset Sale will not be
completed until after the closing date, it is estimated that the amount
that may be allocated to in-process research and development could
approximate $40.0 million.
|
|
The
pro forma disclosures do not take into account the allocation of the sales
price nor the timing of earnings recognition. Furthermore, no income taxes
are assumed to be payable on the Asset Sale due to the underlying tax
basis of the assets being sold and the availability of net operating loss
carryforwards. The Asset Sale is expected to be subject to nominal amounts
of Federal alternative minimum tax and state income
tax.
|
8
NOTES
TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
|
(c)
|
The
adjustment adds back the allocated corporate general and administrative
expense that was included in the operating results of Specialty
Pharmaceuticals. These expenses will continue to be recorded as an expense
of the retained Enzon business in whole or in part. The actual effect on
Enzon’s corporate overhead resulting from the Asset Sale cannot be
objectively measured. The unaudited pro forma condensed consolidated
financial statements do not reflect actions that may have been taken by
management subsequent to the Asset Sale to reduce costs nor do they
reflect the cost structure that will exist in the
future.
|
|
(d)
|
As
part of a transition services agreement with the Purchasing Parties, Enzon
will continue to provide research and development services to Defiante
Farmacêutica, S.A. Costs to be incurred will be reimbursed to Enzon and
Enzon will receive a mark-up on those costs at percentages provided for in
the transition services agreement. The amount of the mark-up cannot be
reasonably estimated at this time. The duration of this contract research
and development effort is anticipated to be between one and three
years.
|
|
(e)
|
No
income tax provisions have been made due either to current period
operating losses or the utilization of deferred tax assets to offset taxes
that would otherwise accrue to operating
income.
|
The
pro forma adjustments to the statements of operations do not include the
following revenues, expenses and events:
|
·
|
milestone
payments related to research and development efforts that may be received
in the event of achievement of certain regulatory
approvals;
|
|
|
·
|
royalty
payments that Enzon would be entitled to receive upon the achievement of
Product sales revenues through 2014 in excess of baseline sales levels as
outlined in the Asset Purchase Agreement;
|
|
|
·
|
expense
related to the vesting of unvested and unrecognized stock options and
nonvested shares upon the closing of the Asset Sale (the estimated amount
of the accelerated vesting is approximately $1.5
million);
|
|
|
·
|
expense
related to the possible vesting of unvested and unrecognized stock options
and nonvested shares held by Enzon’s executive officers under
circumstances to be agreed upon by Enzon and such executive officers (the
estimated amount of the possible accelerated vesting for such executive
officers is approximately $4.6 million); and
|
|
|
·
|
potential
uses of net proceeds from the Asset Sale, including repurchase of $0 to
$250 million of Enzon's 4% Convertible Senior Notes due
2013.
|
9